Fundamentals

Life of a Whale

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GAMES PEOPLE PLAY LIFE OF A WHALE

By Trading Room

What is a Whale?

A whale can be an individual or a group of people or an institution or group of institutions or an exchange owner or group of exchange owners with large & concentrated holding in particular stocks / commodities / currencies / coins. Anyone with money & some knowledge can become a whale. In most cases whales are hand in gloves with management of companies / foundations of stocks / coins.

I had a privilege to work with & meet people in the power structure who are at the top of the pyramid in the whale value chain. At some point worked with them “managing” certain assets in emerging markets. This was pre crypto & essentially in stocks.​​​​​

 

The life of a whale is interesting in the sense they control the candlesticks and what goes behind the algos. I remember a particular incident in early nineties when I was on a breakfast table with this big whale who was “managing” a large stock (let’s call it Tenron) One of his associate came to brief him about technical levels.

Interestingly this big guy had no clue about how technicals work. But here was the conversation:

(Remember at that time there weren’t automated algos, everything was done manually including charting)

 

Whale: ok, so what’s the technical story with Tenron?

​Associate: chief, the over all trend is up, for now we are retracing towards 38.2% fib level, ideally if this level holds the stock can technically continue the trend & print new highs.

Whale: ok, so what price I need to hold to maintain this level ?

Associate: 622 is 38.2% Whale calls his trading desk & asks them to “manage” the price around 625 & above & buy as much as it’s needed to make sure price doesn’t close below 622

This was our daily routine. Morning briefings by technical analysts about what needs to be done, and based on that whale will position his trades to ensure the market is “managed” to accommodate technical levels. However the most interesting part wasn’t this. The most interesting part was Pump & Dump. It was the same routine as how it’s being done now. And here is how it worked:

Let’s assume a company called Mont Fleur raised some money from IPO Market by selling only 10% of their shares. That means 90% of the shares were held by the owners / promoters (Yupe in those days it was possible to sell only 10%) let’s assume they had 100,000,000 shares out of which 90,000,000 are owned by owners / promoters.

Now the owner of Mont Fleur will meet the whale & strike a deal to sell 50–80% of his shareholding. Assume the market price was 10, whale will strike a deal at 1–2 or 5 depending on the quality of the company. So whale already made a paper profit without paying a penny as this is just a deal. No money is paid until shares are offloaded (well sometimes some token amount is paid)

So whales acquired let’s say 80,000,000 shares for 5 dollars. For which they just paid 1 dollar as upfront and balance only when those shares are dumped in the markets. Whale group will than start pumping the price by creating artificial volumes by buying and selling among themselves and pump the price from 10 dollars to let’s say 100, 200 or even 500

Then comes the epic dump, they would start selling at peak of 500 all the way to 25 wherein the stock would lose 95% of its value. The retail investor would buy at 500, 400, 300, 200,100, 50 and even at 25 hoping that the stock would eventually recover above his average price.

 

In the meantime whales exited the stock completely. They paid 1,2 or 5 dollars which they sold for an average 100 so they already made their money. They will move onto their next stock and repeat the same game.

In the meantime another whale group starts accumulating / acquiring the same stock around 25–50 area. They accumulate only 10–20% of the floating stock and with little effort they are able to pump it back above 150–200. The retail crowd never sells hoping it’s going back above 500. So the new whales entered at 25–50 exits at 150 too and retail crowd keep accumulating at every price hoping someday it will get back to the highs.

In nutshell, whales can get an easy access to the stocks / coins for next to nothing prices. When they pump them they don’t invest much as Market hype helps them. Their only investment is in media / influencers / some upfront to promoters and some market buying. Once the dump starts every coin / stock sold is their net profit. Once they sell 100% of their stock, they have very little incentive to Pump the same coin / stock again.

The next pump is always initiated by new whales who get attracted to a large liquid coin which has so many active investors now. The good ones continue to find buyers and take off organically at some stage. The bad ones perish.

So Whales always Pump coins / stocks to epic levels. However they do this with new coins / stocks every time after their position is dumped in the market. The next wave of pump is always organic until a new set of whales acquire some position in that coin / stock.

Keep pumping & dumping. So here is your secret, if you want to make 10000% don’t focus on old coins. Try to discover new ones where the owners hold near 100% supply. If you are lucky, you may get to ride some epic pumps along with the whales.

If not you are always going to be the dumping ground for whales! Treat this as a fiction story.

Article written by @TradingRoomApp

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This article was originally posted on Medium.

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